Bankruptcy Code Definition: “Attorney” is Attorney. Or, Is it?


There are some interesting aspects of the definition of “attorney” in the Bankruptcy Code.  Specifically, it provides that “attorney” “means attorney, professional law association, corporation, or partnership, authorized under applicable law to practice law.”  11 U.S.C. § 101(4).  This raises questions about what an individual attorney is, whether the required authorization to practice is state, federal or both, which court(s) have the ability to police professional conduct, and whether an association, corporation or partnership ever authorized to practice law.

For an individual, the definition provides that an “attorney” is an attorney.  Does that refer to admission to practice?  It seems that it does, so in other words, an “attorney” is a person “authorized under applicable law to practice law.”  For example, the Collier Bankruptcy Manual, 4th Ed., provides “An attorney must be authorized to appear before the federal bankruptcy court.”  ¶ 101.04. Courts are able to police attorney admission by means of the retention and payment provisions of sections 327-330 of the Bankruptcy Code.  So, for example, the Court in In re Poole, 222 F. 3d 618 (9th Cir. 2000) held that payment to a chapter 13 debtor’s attorney could not be disallowed only because the attorney was not a member of the state bar, so long as the attorney is admitted to practice in the federal courts of the district where the petition was filed.  Indeed, Collier summarized the authority this way: “The extent to which he or she must also be authorized under the laws of the state in which the bankruptcy court sits may depend on the jurisdiction and the rules applicable to the district court and bankruptcy court for that jurisdiction.”  Collier Bankruptcy Manual, ¶ 101.04.

In many jurisdictions, admission to the federal court is not dependent upon admission to the state in which the federal court sits.  For example, Local Rule 83.5 for the Northern District of Ohio provides that to be admitted, an attorney needs to be admitted to practice in the highest court of any state or in any district court of the United States.

This raises the question about which court has authority to enforce professional rules, since the definition of “attorney” may include the requirement that an attorney be licensed by the state in which the federal court sits.  However, federal courts have long ruled that attorney conduct (or misconduct) is to be addressed by the federal courts, and most courts so provide in their local rules.  For example, Local Rule 2090-2(a) of the Bankruptcy Court for the Northern District of Ohio provides that Ohio’s Code of Professional Responsibility applies so far as they are not inconsistent with federal law.  The rule does not specify which federal law, and some sources indicate that in addition to state ethical rules, bankruptcy lawyers may also be subject to a national standard of ethics, consisting of the American Bar Association’s standards, which can differ from state standards.  See, 1 Collier on Bankruptcy, ¶ 8.02[3].  The Northern District of Ohio local rule further provides that professional conduct and attorney discipline are governed by District Court Rule 83.7, and the notes to the rule make it clear that the Bankruptcy Court has power to handle such matters under 11 U.S.C. § 105.  Indeed, some state courts will refuse to address grievances against lawyers only admitted to the federal courts in that state.  See, e.g, Disciplinary Counsel v. Harris, 137 Ohio St.3d 1, 2013-Ohio-4026 (Attorney not licensed in the State of Ohio practicing in federal court located in Ohio is not subject to Ohio Rules of Professional Conduct enforcement by the Ohio Supreme Court).

In addition, one of the most important distinctions between bankruptcy and non-bankruptcy ethics issues is that bankruptcy lawyers are subject to considerable scrutiny by the Court and other parties with respect to their fees, so that ethical errors in bankruptcy can immediately result in denial or disgorgement of attorneys’ fees.  Indeed, debtors’ counsel have disclosure obligations and review of compensation no matter what chapter a debtor is filing under. See, e.g., 11 U.S.C. § 328 (Compensation considerations, including time spent, rate, whether services were necessary, whether compensation is reasonable); Bankruptcy Rule 2016 (Requiring disclosure of compensation); Bankruptcy Rule 2017 (Examination of debtor’s transactions with debtor’s attorney, both before and after the bankruptcy filing, requiring the court to determine the reasonable value of the services rendered).  To determine the propriety of compensation, courts evaluate the debtor’s counsel’s conduct in the case, considering such factors as competence in performance of services, whether any benefit was derived from the services, whether the attorney engaged in misconduct, whether the services rendered were compensable under the rules, and whether the attorney has engaged in unethical conduct.  See, 1 Collier on Bankruptcy, ¶ 2017.11 . Thus, the importance of being aware of ethical issues and related professionalism issues in bankruptcy matters cannot be overstated, and is an integral part of the term “attorney” in the Bankruptcy Courts.

The Bankruptcy Court’s power to impose sanctions extends beyond its oversight of compensation.  For example, section 521 of the Bankruptcy Code requires a debtor to cooperate with any trustee in the case, and imposes sanctions for failure to do so.  At least one court has relied on this provision in imposing sanctions on the debtor’s counsel as well.  See, In re Stinson, 269 B.R. 172 (Bankr. S.D. Ohio 2001).

The last point about the definition of “attorney” is the somewhat odd inclusion of professional law association, corporation, or partnership, authorized under applicable law to practice law.  Admission of attorneys by states and federal courts is accomplished on a per lawyer basis, and the firm with which an attorney is associated has no ability to obtain a license to practice law itself.  The odd addition of the firm to the definition of “attorney” makes sense, however, in the context of the retention provisions of the Code and the general imputation rules of professional rules.   Section 327 permits retention of attorneys that do not hold or represent an adverse interest, and who are disinterested.  Certainly, the individual lawyer sought to be retained needs to meet this test.  However, the Ohio Rules of Professional Conduct, modeled after the ABA rules adopted in most states, provide for imputation of conflicts of interest among the individual lawyers within a firm.  O.R.P.C. 1.10.  Accordingly, the attorney retention rules require that both the individual lawyer and the lawyer’s firm to meet the conflict and disinterestedness standards.  Viewed in this context, the definition of attorney to include the firm too makes more sense.

Patricia B. Fugée
FisherBroyles, LLP

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